Long Haul for Homebuyers with a 50-year Mortgage

Physician's Money Digest, December 2006, Volume 13, Issue 12

Debuting in California in March, in thepast few months 50-year mortgages havepopped up in a handful of states.Physician-homebuyers who are seekingrelief from high monthly mortgage paymentsmay think extending the length oftheir mortgage will give them much-neededrelief. According to the NationalAssociation of Realtors, half of first-timehome buyers are age 32 and older, meaningif they sign a 50-year mortgage, theywould be paying off their house until age82. But few people live in one house for solong, meaning that while the 50-yearmortgage looks appealing in terms oflower monthly payments, so many homebuyerswould be better off with hybridadjustable mortgages. Even if you did planon staying in the same home for 50 years,Bankrate.com points out that the total costis much higher than a traditional 30-yearmortgage, because the interest rate duringthe extra 20 years could rise significantly.For example, a 30-year loan of $300,000with a fixed rate of 6.5% would mean amonthly payment of $1896.20, while thesame loan stretched out to 50 years wouldbe lower at $1691.15. However, becausethe payments are stretched out another 2decades, the homebuyer would end upshelling out a total of $332,058 more.